EconLog Archive
Business Economics
Inconvenient View, Free Press Edition
Scott Sumner recently posted on the importance of holding views that are inconvenient to your larger beliefs. I agree – it’s important for good intellectual hygiene to be aware of these things. In his excellent book Governing Least: A New England Libertarianism, Dan Moller makes a similar point, using constitutional law as a framing device: .. MORE
Books: Reviews and Suggested Readings
Wisdom from Thomas Sowell
I’ll be discussion leader of a symposium this coming Friday and Saturday on the work of Thomas Sowell. I spent more time than I usually do coming up with discussion questions because Sowell’s writing is so clear, so evidence-based, and so persuasive, that I had trouble injecting controversy. The main controversy I could come up .. MORE
Economics of Education
Who Deserves Student Loan Forgiveness?
What is the libertarian analysis of the student loan forgiveness policy now being implemented (subject to Supreme Court approval) by the Biden Administration? Before we can offer any such examination, let us consider the following. The government first boosted tuition into the stratosphere by requiring all sorts of silly reports of universities, which necessitated the .. MORE
Economic Growth
In Praise of Electricity
Indeed, improvements in technology were so important that the one chapter Bryson devotes to something other than a room in the house or a physical area in or around the house is his chapter on the fuse box. Electricity truly revolutionized life. Bryson writes, “The world at night for much of history was a very .. MORE
Finance
The bigger bailout
A great deal of attention has focused on the bailout of SVB depositors, but the bigger story is the bailout of other banks. (At least bigger as of today, there are rumors the government may extend the over $250,000 deposit bailout to all banks. You can imagine what I think of that idea.) David Beckworth .. MORE
Money and Inflation
Is Inflation High? Not According to the Producer Price Index
Cato Institute economist Alan Reynolds points out, in “Producer Price Inflation Averaged One Percent for Eight Months,” Cato at Liberty, March 21, 2023, that, as the title suggests producer price inflation is very low. So why does inflation measured by the Consumer Price Index look so high? Reynolds explains: Although market rents have been falling .. MORE
Violence and War
Prosecution of War Crimes: A Sign of Civilization
It is a cliché, but true, to say that war is an ugly affair. Which does not mean that there are no good moral and economic arguments for defensive wars. The world is not only inhabited by noble savages. But just as international thugs must be dissuaded from waging aggressive wars, soldiers on all sides .. MORE
Politics and Economics
Further Thoughts on Silicon Valley Bank
These are from a former student and I’ll probably have more of my own. A former student of mine at the University of Rochester’s Graduate School of Management, whom I hadn’t heard from in over 40 years, emailed me on the weekend and gave me permission to quote him. He had read my Hoover Defining .. MORE
Finance
Did the Fed cause the banking crisis?
This question could have several interpretations: 1. Did lax regulation from the Fed cause banks to take excessive risks? 2. Did the sharp increase in interest rates during 2022 cause the crisis? Here I’ll focus on the second question, which itself is highly ambiguous: 1. Did a tight money policy at the Fed cause sharply .. MORE
Economic Growth
Mont Pèlerin 1947 and Germany’s Economy
Part of how I used the time during our extensive power outage was to read, by lantern, most of Bruce Caldwell, ed., Mont Pelerin 1947. Published by Hoover Institution Press in 2022, it’s a recounting, with transcripts of the various discussions, of the first meeting of the Mont Pelerin Society at, you guessed it, Mont Pelerin .. MORE
Regulation
Electricity Hell, Part Deux
I have been less active in responding to comments since the evening of March 9. The reason is that at 7 p.m. our power went out and wasn’t restored until March 11 at 9 p.m. Then it went out again from March 13 at 9:30 a.m. to who knows when. I’m writing this at 3 .. MORE
Finance
Lyn Alden on Bank Safety
In a recent Reason magazine interview, Lyn Alden makes a very good point: And Lyn Alden, founder of Lyn Alden Investment Strategies, says “banks are basically highly-leveraged bond funds with payment services attached, and we treat it as normal to keep our savings in them.” She argues that the Federal Reserve makes it nearly impossible .. MORE
Finance
What’s in a Name? Silicon Valley Bank and Who Should Bear the Risk
Is there a more fitting name for a bank that has taken on too much risk than “Silicon Valley Bank”? Now it has failed, but instead of taking down with it those most responsible, the federal government has stepped in to rescue its explicitly uninsured depositors. The Fed promised “no losses will be borne by .. MORE
Books: Reviews and Suggested Readings
Subjective Self-Worth & Division of Emotional Labor
Many people view economics primarily through the lens of market settings. However, at its core, economics is the human science. Insights from economics can penetrate the realm of emotional intelligence. A recent book, The Courage to Be Disliked, by authors Ichiro Kishimi and Fumitake Koga demonstrate some fundamental economic lessons making their way into the .. MORE
Political Economy
Is the Future of America Related to Paris Garbage?
Chances are higher that France is the future of America than the converse. Hence, even an American should not disregard this post. The featured image shows a big pile of uncollected garbage on boulevard Saint-Michel, in Paris, on Thursday. Many garbage collectors, already assured of a generous state-paid pension at 62, are on strike to .. MORE
Government Growth
On the Use and Misuse of Evolved Order
Classical liberals tend to be big fans of the argument from evolution. To say that a particular social tradition or market outcome was the result of an evolved process, or an emergent outcome, or a spontaneous order, is to establish a sort of strong presumption in favor of its legitimacy or usefulness. This isn’t meant .. MORE
Books: Reviews and Suggested Readings
Mario Vargas Llosa’s classical liberalism
Should social scientists read a book on classical liberalism written by a great novelist? Many would be skeptical, assuming that a novelist, no matter how great, can hardly contribute an original perspective on matters concerned with economic and political ideas. Yet in the case of Mario Vargas Llosa they would be wrong, as proved by .. MORE
Monetary Policy
Bailing Out SVB Was a Really Bad Idea
On CBS’s Sunday morning interview show, Face the Nation, Treasury Secretary Janet Yellen stated clearly that the federal government would not bail out the failed Silicon Valley Bank. Many of us took that to mean that there would be no bailout. But Yellen said in the same interview that the feds would try to meet .. MORE
Price Theory
In my previous post, we saw how George Akerlof’s argument can persuade us that markets fail- from the perspective of microeconomics. This brings us to the “window” of price theory, from which we can observe that instead of demonstrating the case of market failure, Akerlof is also illustrating the exact opposite in the very same .. MORE
Finance
The wrong way to think about moral hazard
I am continually amazed at the amount of nonsense that I’ve been reading on the subject of moral hazard. Here are a few examples: 1. Moral hazard played no role with SVB because the shareholders and bondholders were wiped out. (nonsense) 2. Moral hazard isn’t an issue because average people don’t think about the safety .. MORE
Price Theory
Choosing Among Lemons
In this post, I would like to contrast the price theory I previously described with “microeconomics,” which is what James Buchanan refers to as the “science of choice” (see also Buchanan 1969). In microeconomics, the logic of human choice is not a subset of economic theory, but its defining characteristic. Microeconomics, as it practiced today, .. MORE